Ask CK: How Do You Like Your Prices Raised?

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Reader Julia at Grow. Cook. Eat. asks me an exceptional question:

I'm curious to know how you would prefer to see companies raise their prices. Inflation is inevitable. As the cost of inputs goes up (not just the cocoa, but also fuel for transportation, etc), so does the cost of production. We can't expect food-companies to keep prices the same indefinitely (or can we?).

This is a fascinating question, although I'd like to first take minor issue with Julia's premise: In my view, price inflation isn't always inevitable. It's common, granted. But pricing trends have been anything but consistent over the past decades across many products and services. And hidden in this wide range of pricing trends is a key to becoming a more empowered consumer.

Again, granted, some prices only seem to go up. The price of most meats and almost all branded cookies, crackers, soda, etc., rise consistently--as do many personal services, like haircuts and restaurant meals. At the same time, however, prices of many other foods have stayed surprisingly stable. Quite a few products, like dried lentils, canned and dried beans, potatoes, carrots, cabbage and other foods can often be purchased at prices not much higher than what I paid when I first moved out on my own some twenty years ago.

Further, some areas of the grocery store, thanks to new competition, are facing falling prices: for example, I can now buy most of my spices at lower prices than I paid just a few years ago, thanks to increased competition from some new spice suppliers now on grocery store shelves. (Long time readers will know exactly why this warms my heart.)

Finally, there are some segments of the consumer products world where prices go through secular declines: consumer electronics, computers, cellphones and cellphone service all cost a fraction (and in some cases a tiny fraction) of what they cost a decade or two decades ago. Even our cable bills, long a bastion of steady annual price increases, are starting to sag in the face of other, less expensive ways to watch TV. (If you haven't called your cable company recently and asked for a price concession, please do so. Right now. I'll wait.)

Okay. Eons ago, when I was getting paid to pick stocks on Wall Street, we had an expression for companies that tried to put through price increases. We'd ask, "So, is their price hike going to stick?" In other words, would their customers accept the price hike? More importantly, did their customers have other suppliers or substitutes that they could turn to if they wanted to resist the price hike? These were the key factors that drove whether a price hike would "stick"--or if the company had to cave in and roll that price hike back.

And this, I firmly believe, is the key to empowering consumers when we face price hikes.

I'll even go further, and argue that we consumers have simply conditioned ourselves to accept regular price increases with certain products. Among the worst offenders: branded, heavily-advertised products and second-order foods. Yes, we notice them (usually), grumble a bit to ourselves, and maybe even mentally shake our fists at Big Food. But then we willingly take these products to the checkout line and buy them anyway.

Maybe, just maybe, we should entirely rethink these purchases. What if we quit buying them--or drastically cut back--and made the makers of those products cave in and roll back their prices? We are already beginning to see this happening across some branded food categories, as consumers are rising up, adjusting their purchasing habits, and finding substitutes for branded products that are priced above their real value. As a result, companies like Unilever and Proctor & Gamble, after years of subjecting us to steady, consistent price hikes, are finding a the rules are changing. They've had to step up discounting and cut prices in order to maintain sales. In other words, consumers are pushing back--and these companies are caving.

So with that as a backdrop: here's how I'd like my price hikes: I'd like them to be clear, not hidden. Overt, not stealthy. In other words, pretty much the exact opposite of what Hershey's and Davis Baking Powder did.

Look: if you're going to raise prices, don't hide it. Just admit it and own up to it. If your product is worth the extra value, I will still pay for it. And if you try to sneak a stealth price hike past me, I will drop your product like a bad habit.

Readers, what's your view? How do you like your prices raised?

Related Posts:
The Do-Nothing Brand
Divorce Yourself from the False Reality of Your Grocery Store
Ten Thoughts On the True Value of Brands
Brand Disloyalty

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The Calico Cat said...

This is a tough one for me. I know we are all price conscious. But I'd prefer for the prices just to be "fair" without sale &/or coupon pricing.

If the price is $2, so be it. Don't change that to 2 for $3.80 this week (especially if you have to buy 2 to get the savings) or insert a $.25 coupon that can be doubled here but not there in the paper that I just don't want to buy!

If because of the price of tea in China (or some other reason) the new fair price is $2.10, so be it. Just change the damn price, don't remove ___% to keep the price at $2.

Kat said...

I definitely appreciate more transparent price-hikes than changes in package/product size.

Just last weekend when I was at the grocery store, I considered buying a container of tzatziki because I didn't want to go through the hassle (really, it's more like a 15 minute process in our house) of making it myself.
After I saw the price tag ($4), my jaw dropped, I put it back in the cooler and (duh) made my own for half the price.

Marcia said...

I'd rather they just raise the price. I hate that now frozen vegetables come in 12 oz bags instead of 16 oz, and that a can of tomatoes is 14.5 oz instead of 16 oz, and that pasta comes in 13.25 oz boxes.

I mean, really. If I want to cook a pound of frozen veggies, then I have to open two bags. That's just an example.

chacha1 said...

I think there's a big distinction to be made between manufacturer pricing and reseller pricing. Part of Calico's comment referred to the sort of discounting that happens at point of sale. I think Daniel was talking about pricing set by the producer.

I prefer open price increases for the same quantity of a product, versus holding the price steady for less of the product. That seems to be the consensus so far!

There is nearly always an alternative producer or seller for a given product, so if everyone kept their quantities standard, consumers would have a much better basis for price comparison (anybody besides me hate that "unit pricing" small print?).

You would think our National Institute of Standards and Technology would be on this like a squirrel on a bird feeder, but apparently not.

Barbara | Creative Culinary said...

I agree with your other readers...keep them fair and keep them transparent. It's irritating to see prices go up but it's even more so to see producers try to fool us through changing the size of packaging.

And...if special circumstances warrant a price increase to keep the goods on the shelf; I sure want to see them go back down again once that circumstance is over. Seems once they get us used to paying a higher price, too often it stays in place once the shortage is over. I'm looking at you Pine Nuts. :)

Daniel said...

Good insights so far.

One response that comes to mind, now that's it clear that most/all of us want clearer pricing and no lame discounting tactics, is why do the companies that sell us stuff use these tactics? Or better said, why do the tactics work?

Because we enable them to work.

Kat, I think, really gives us the ideal solution to help us stop this enablement: Find your own substitutes--whether it's a competing product or a solution like making it at home for a fraction of the cost.

One final thought: I wrote a piece here at CK on how consumers can make the most of the natural rhythm of retail discounting. It's a timely piece to bring back in front of readers.


Anonymous said...

I hate when they change the sizes of things, it makes it difficult to follow recipes to the letter (which I rarely do, but still) or keep portion sizes consistent.

Julia said...

An interesting side conversation -- why "second-order foods" and highly marketed foods are more susceptible to price increases... they have more inputs (including packaging and labor)that create more variables for price increases.

Also, with commodity type foods such as lentils and other legumes, there's less opportunity for quality differentiation (read: marketing), which contributes to premium pricing.

As for transparency in price increases, I'm going to buck the trend here. For some items, like candy, chips and sodas I'd rather see the packaging size decrease. The industry went through a phase of super-sizing everything which has contributed to the epidemic of obesity. I'm glad to see portion sizes coming back down to reasonable.

I will agree that with things like frozen veggies, pasta or tinned tomatoes, keep the package size the same and just raise the prices.

Daniel said...

Julia, thank you for bringing up the question in the first place. It was a provocative one.

And you make an interesting point on the package sizes of candy, chips and soda. I'm not sure I agree, but I can see where you're coming from.


The Calico Cat said...

Maybe the new question to answer is how the producer price varies from the point of sale prices.

Like why can I get the brand of pasta sauce that I prefer for $1.88 at retailer X, but the same jar is near $3.50 at retailers Y, Z, A, B, & C?

How much was it produced for if retailer X can regularly (not on a special sale, no coupons) sell it for close to half what the rest of the market sells it for?

(Yes, I know I can make pasta sauce less expensively at home, but my last batch was too ____.)

Ronda said...

I agree that it is far more frustrating to me to downsize the packages, since it messes up my recipes. Especially in the case of canned items, this contributes to waste, since there have been times I've had an opened can of something in the frig and forget about it.
Another irritation to me: having a 16 oz. size and a 29 oz. size of a particular product, such as pumpkin.When I want to make a double recipe, I would prefer to use the *32 oz* can,(which doesn't exist) thank you! Yet it irks me that the 29 oz. size is cheaper per oz, so I usually just make it less pumpkin-y.

Daniel said...

Ronda, great point. That's another unintended consequence of stealth price hikes. Those seemingly minor 3 ounces of missing pumpkin works out to 10% of the total... not enough maybe to screw up a recipe, but certainly enough to make a difference. Thanks for raising the issue.